January 19, 2017

Equilibrium 

Equilibrium: The point in which the supply curve intersects with the demand curve.

Excess Demand: Occurs when quantity demanded is greater than quantity supplied. This will result in a shortage.

• Shortage: Consumers cannot get the quantities of the items they need
• Created by Price Ceiling
• Price Ceiling: When the Government puts a legal limit on how high the price of a product can be
• *Example: Rent Control

Excess Supply: Occurs when quantity supplied is greater than quantity demanded. This will result in a surplus.

• Surplus: Producers have inventories that they cannot get rid of
• Created by Price Floor
• Price Floor: The lowest legal price a commodity can be sold at.
• Government uses this to prevent prices from becoming to low
• *Example: Minimum Wage

January 11, 2017

Elasticity of Demand 

Elasticity of Demand: Measure of how consumers react to a change in price.

Elastic Demand: Demand that is very sensitive to a change in price.

• Product is not a necessity
• There are available substitutes 

*Example: Steak, Fur Coat, Soda 

E > 1

Inelastic Demand: Demand that is NOT very sensitive to a change in price.

• Product is a necessity 
• There are few to no substitutes 

*Example: Gas, Insulin (We still buy gas/insulin no matter how high)

I < 1

Unitary Elastic:  

E = 1

Step 1: Quantity 

New Quantity-Old Quantity/Old Quantity

Step 2: Price

New Price-Old Quantity/Old Quantity 

Step 3: PED

% Change in Quantity/% Change in Price

Total Revenue: The total amount of money a firm receives from selling goods and services.

Price x Quantity (PxQ)

*MUST HAVE A $!!!! 

January 5, 2017

Three Types of Movements That Occur Within the PPC

Inside the PPC 

*Inside the Curb: Recession, Famine, War, etc.

Along the PPC

Shifts of the PPC 

*You can go either way 

 

January 4, 2017

Factors of Production

1. Land

• Natural Resources

2. Labor

• Work Exerted

3. Capital

• Human Capital: When people acquire skills and knowledge through experience and education
• Physical Capital: Money, Tools, Buildings, Equipment, and Machinery

4. Entrepreneurship

• Risk Taker
• Innovative

Vocabulary

• Trade-Offs: An alternative that we sacrifice when we make a decision.

• Scarcity leads to trade-offs

• *Ex: A farmer who plants tomatoes in one spot cannot plan corn in the same spot at the same time, he can only have one or the other.

• Opportunity Cost: Most desirable alternative given up as a result of a decision.
• “Guns or Butter”: Trade-offs that the government makes when choosing whether to produce more or less military or consumer goods.
• Thinking at the Margins: Deciding whether to add or subtract one additional unit at some resource

  
  Production Possibilites Graph/Curve/Frontier

  PPG/PPC/PPF

• Production Possibilities Graph/Curve/Frontier: A graph that shows alternative ways to use economic resources.
• Efficiency: Using resources in such a way to maximize the production of goods and services

• Increases Profit

• Under Utilization: Opposite of Efficiency; Using fewer resources that an economy is capable of using

• Decrease in Profit

                                                 

A= Attainable and Efficient

C=Attainable, Inefficient, Underutilization

B=Unattainable (Outside PPC)

4 Key Assumptions

1. Only 2 goods can be produced
2. Full employment of resources
3. Fixed Resources (Factors of Production)
4. Fixed Technology

January 3, 2017

Basic Concepts of Economics 

Macroeconomics vs. Microeconomics

Macroeconomics: The study of the the economy as a whole. 

• Inflation
• Minimum Wage
• International Trade

Microeconomics: The study of individual or specific units of the economy.

• How households and firms make decisions and how they interact in markets 
• Looking at specific thing (Ex: Supply and Demand)

Positive Economics vs. Normative Economics 

Positive Economics: An attempt to describe the world as is. 

• Very descriptive 
• Collects and presents facts

Ex: "Minimum wage causes unemployment."

Normative Economics: Attempts to prescribe how the world should be

• Opinion Based 

Ex: "The government should increase minimum wage."

Needs vs. Wants 

Needs: Basic requirements for survival 

Ex: Food, Clothing Shelter 

Wants: Desires

Scarcity vs. Shortage 

Scarcity: The most fundamental economic problem facing all society 

*Unlimited wants with limited resources 

Shortage: Quantity demanded exceeds quantity supply

*Shortage is temporary, scarcity is permanent 

Goods vs. Services 

Goods: Tangible Commodities

• Can be bought, sold, traded, and produced   

Capital Goods: Items that are used in the creation of other goods
Ex: Steel for a car

Consumer Goods: Intended for final use by the consumer 
Ex: The actual car

Services: Work that is performed for someone.